Volume 33

A Government Shutdown Could Affect Public Health

If Republicans and Democrats in Congress cannot reach a short-term spending agreement, the federal government will face a partial shutdown in just 10 days (as of midnight Oct. 1). While a shutdown will not affect national defense and other mandatory spending, it will impact health programs. The Biden administration has asked Republicans to fund select services, but it's unclear if GOP lawmakers are inclined to partially fund public health. That said, the U.S. Department of Health and Human Services (HHS) has contingency plans in place to ensure continuation of essential programs like vaccine development and authorization, clinical trials, and monitoring for disease outbreaks. During past shutdowns, there were disruptions such as the temporary closure of the National Institutes of Health clinical trial registration portal, difficulties enrolling new patients in government programs, and funding challenges for programs like Temporary Assistance for Needy Families.

So What’s The Big Deal? In the event of a shutdown, the immediate future of federal health programs depends on whether they are deemed essential. While services like Medicare and Social Security operate under a different funding structure than the one Congress is in charge of and, therefore, will continue to function, other public health agencies will close as federal workers are furloughed. With the upcoming respiratory infection season and preparations for a fall vaccination campaign, a shutdown could impede efforts to control outbreaks. Past shutdowns, such as the one in 2018, raised concerns about the potential shutdown of critical systems like the Centers for Disease Control and Prevention’s (CDC) flu surveillance.

Your Big Thoughts: If you’re a hospital or other provider that relies on federal dollars, how are you preparing for a potential shutdown. How would one affect you and the patients you serve?

Labor Costs for Hospitals Appear to be Easing

According to Bureau of Labor Statistics data and discussions with rated nonprofit healthcare systems, health systems have seen a consistent decline in year-over-year hourly earnings growth within the hospital and ambulatory care sub-sectors. For hospitals, this metric has experienced a substantial shift. From its pandemic peak of 8.4% and a 2023 high of 5.15%, it has now settled at 3.75% in July. While this represents a decline, it still surpasses the 2.3% average increase observed over the past decade.

So What’s the Big Deal? The current data trends suggest a potential stabilization in staffing costs. While the trend signals a possible turning point (or at least a stabilization), hospitals will still need to deal with staffing shortages as we head into the second half of the decade.

Your BIG Thoughts: Are these numbers a blip or a longer-term trend? What is the chief reason for the labor cost easing – economic factors or a key change implemented by hospitals?

VC and PE Investments in Health IT Stabilize

According to PitchBook, investments in health IT appear to be stabilizing after hitting a low in 2022 and getting off to a rocky start in 2023 due to higher interest rates, limited access to debt financing, and discrepancies in valuations between buyers and sellers. Still, even though investors are maintaining their interest in the healthcare IT space, this enthusiasm has yet to translate into return deal flow.

So What’s The Big Deal? To truly harness the transformative potential of generative AI and digital health innovations in healthcare, the industry must first establish trust in high-performing language learning models and integrate transparency and human oversight into these technology-driven processes. And while we’re optimistic about the future. investor activity will likely not gain momentum until in the latter half of 2024.

Your BIG Thoughts: What are the most interesting emerging opportunities for health IT?

Healthcare Providers Plan to Boost IT Investments

Speaking of investment in health IT, a new Bain & Company report shows healthcare providers plan to boost their investments in IT and software due to a confluence of factors, including emerging technologies, labor shortages, and financial challenges. In a survey of 201 healthcare executives taken in June, 56% of respondents identified software and technology as their top three strategic priorities. This finding marks a substantial increase from 2022 when just one-third of respondents held a similar view. Almost 80% of respondents indicated they already have increased their IT spending over the past year. Approximately three-quarters anticipate this spending surge will persist over the next 12 months.

So What’s the Big Deal? A few things:

There will likely be a widening disparity between health systems that have and those that have not. Academic medical centers and larger hospitals and health systems appear poised for more robust spending increases. Smaller, less financially stable hospitals will continue to have suboptimal systems for their providers and patients. We need to ensure there are incentives to support these facilities.
While many executives plan to increase IT spending, the devil is in the details. How much spending will be for simple upgrades and maintenance? Or will most of these planned investments go to significant infrastructure improvements that fundamentally change workflows and efficiencies?
The big question is this: Can many health systems afford generative AI interfaces to off-load work for clinicians and reduce staffing needs? In the near term, I remain doubtful.

Your BIG Thoughts: Where should hospital execs put their money? Where will they get the biggest bang for their buck – especially if they’re a smaller system looking to keep up?

Can AI Help Determine Appropriate Cancer Treatments?

In a recent Swedish trial involving 80,000 women, AI-enabled breast cancer screenings emerged as a standout success, surpassing the performance of two experienced radiologists. The findings, published in The Lancet Oncology, highlight the potential of AI to revolutionize breast cancer detection, offering a more accurate, less costly, and efficient approach. However, the AI landscape is nuanced. Studies in the Annals of Internal Medicine present a contrasting picture. In the case of advanced adenoma detection for colorectal cancer, AI did not demonstrate clear superiority, raising questions about its effectiveness in preventing colon cancer.

So What’s The Big Deal? Cancer is the second leading cause of death in the United States. The AI data is promising, but it’s not time to get too excited yet. There are significant limitations, such as algorithmic biases and the opacity of AI decision-making processes. In the best-case scenario, AI offers the promise of enhanced efficiency, cost-effectiveness, and precision in patient care. We have a long way to go.

Your BIG Thoughts: If you’re a provider, are you ready to depend on AI for breast cancer screening for your patients? What will it take for you to trust?

ER Wait Times Get Worse

According to the Centers for Medicare and Medicaid Services (CMS), patients are spending more time in ERs, which is eroding care quality and patient experience. Longer ER visit times often signal issues like understaffing and overcrowding, which can lead to treatment delays, heightened patient discomfort, and suboptimal treatment conditions. In 2022, the national median ER stay was recorded at 2 hours and 40 minutes, 22 minutes more than in 2014. The worst offenders: Washington, DC and Maryland which have wait times of 5 hours 29 minutes and 4 hours and 2 minutes, respectively. (As an ER doc practicing here, I’m not surprised at all.)

So What’s the Big Deal? Addressing escalating ER wait times is crucial for ensuring timely and effective healthcare delivery while alleviating strain on both patients and healthcare providers. To be clear: we cannot force clinicians to work faster. ER throughput problems are symptoms of systemic issues inside and outside the hospital. We need a holistic approach to addressing the outflow of patients from the hospital, worsening clinical staffing issues, transport services delays, EMR challenges, and psychiatric resource availability. Until incentives change and resourcing shifts, we will continue to be plagued with this growing problem. The next two stories highlight the bigger systemic issues I’m thinking of.

Your BIG Thoughts: What are two or three solutions hospitals can try to reduce ER wait times?

67,000 Kaiser Workers Plan Strike

Tens of thousands of Kaiser Permanente employees have taken a significant step toward authorizing a potential labor strike if a contract agreement isn't reached by September 30. After a series of picket demonstrations during the summer, the Coalition of Kaiser Permanente Unions initiated a strike authorization vote in late August. The unions want their next contract to address concerns related to understaffing and inadequate compensation, which they argue are contributing to reduced care quality and patient access.

So What’s The Big Deal? In the near term, if the strike proceeds ( more meetings are planned this week), nursing staffing firms will need to be in a position to care for patients seeking care at Kaiser hospitals. Some evidence suggests patient care suffers during strikes, especially if hospitals remain understaffed. In the longer term, hospitals must recognize the broadening movement regarding safe staffing levels, benefits, and salary for nurses, residents, and other clinical staff members.

Your BIG Thoughts: What impact will strikes have on patient care? Will labor costs rise again with additional reliance on staffing firms?

Hospitals DSH On Congress Cuts

More than 250 hospitals and health systems have united to urge federal lawmakers to eliminate looming funding cuts to the Medicaid disproportionate share hospital (DSH, pronounced “dish”) program, which are scheduled to take effect October 1. For decades, this program has helped mitigate the financial burden on the country’s safety net hospitals, which provide uncompensated care. Currently, DSH payments are poised to decrease by a staggering $8 billion annually from FY 2024 to FY 2027. That’s more than two-thirds of the program's current total federal spending.

So What’s The Big Deal? These cuts, along with other healthcare programs, hang in the balance as legislators work to reach consensus on federal spending. These reductions would not only jeopardize the healthcare safety net in the United States, but would significantly impair hospitals' capacity to deliver life-saving services, reduce access to care, and adversely affect local economies, potentially leading to job losses. The call to postpone or eliminate these cuts underscores the critical need to safeguard healthcare accessibility and quality.

Your BIG Thoughts: How do these hospitals survive in a world where these reductions take effect? Can they?

CMS Revamps ACOs

CMS has a plan to boost provider participation in one of their largest alternative payment models, aiming to transition all fee-for-service Medicare enrollees into accountable care organizations (ACOs) or other value-based care arrangements by 2030. Providers remain cautious about whether recent changes to the Medicare Shared Savings Program (MSSP) will effectively incentivize participation, however. CMS's proposal, introduced last month, outlines modifications to the MSSP with the goal of increasing ACO enrollment by 20% next year. These changes include adjustments to quality reporting and financial benchmarking requirements, as well as the gradual implementation of a new risk-adjustment model.

So What’s The Big Deal? Providers are closely watching these changes since CMS relies on cost savings to bolster the Medicare Trust Fund, which faces depletion by 2031. The success of these adjustments will be critical to driving the transformation toward value-based care and addressing Medicare’s financial sustainability. I’m highly skeptical providers will flock to these new programs, however. They need to see more clarity and reduced complexity. The financial risks for provider groups remain too high with questionable upside potential. That said, companies with long track records of ACO success will continue to flourish.

Your BIG Thoughts: Play devil’s advocate: will this gambit by CMS work? If so, why? If you don’t think so, how can CMS put providers at ease?

Walmart Eyes ChenMed

Walmart is exploring acquiring a controlling stake in ChenMed, a value-based medical chain known for its primary care clinics. This potential transaction, which is still in the negotiation phase, could value ChenMed at several billion dollars. Walmart has been strategically expanding its healthcare footprint in recent years, aiming to provide more accessible and affordable care options to consumers. Acquiring a majority stake in ChenMed would be a significant step in that direction.

So What’s The Big Deal? This development reflects the broader trend by retail giants to enter the healthcare arena and disrupt the traditional delivery model. Retailers are strategically incorporating primary care services, both physical and through telemedicine, into their offerings so they can serve as a gateway for consumers to access the broader healthcare system. By establishing themselves as the initial point of contact for medical needs, retailers can subsequently guide individuals toward additional services. These services might include in-store pharmacies, urgent care clinics, or even the sale of medical devices.

Your BIG Thoughts: Walmart in healthcare: good for patients or bad?

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Adam Brown

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